ER - my first 6 mo & why they don't care about your CFA I/II

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CFABLACKBELT

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SS ER has been an interesting ride for my first 6 mo. Its an extremely steep learning curve since I am expected to pretty much do everything myself. There are people who will help you here, but not having someone to work under directly, makes things very difficult. Listening to experienced analysts or management in person or on the conference call will humble you fairly quickly. The amount of industry information can be so overwhelming; I sometimes wonder whether I’ll ever become an expert as the more I learn the it seems the less I really know… I absolutely love it though. Compared to any other job I had, it is the most intellectually stimulating and challenging.
The other surprising aspect of the job is how much you actually have to sell your stock. Its not like you’re going door to door and cold calls are much different, but you still have to sell the idea. You have to pitch the idea in front of a room full of sales people, your boss and anyone else who wants to join. My initiation speech was around 10min. Then you get on a call w/ a sales guy to reach out to PM’s/analysts to pitch your idea. What I quickly learned is that being new kinda sucks, especially since a lot of the buyside knows the name better than you do. But it is really fun when you get to pitch a good name and you get someone interested. Hasn’t happened that much yet for me, but as I understand the sector/co./ and more so how to convey my ideas correctly in a few sentences it does get just a little bit better each time.
Earnings… SUCK. Just popped my cherry on my first earnings call last night and man I felt so retarded. I had no clue what to put in my note, I was frantically trying to digest all the new information while adjusting my models. The anxiety was similar to taking CFA2.
This brings me to my final point here. The CFA counts for almost nothing at this job IMO. Sure I guess it kinda helped me better understand Accounts Receivable and Depreciation. And I guess when I come across tax items or what not in the 10K I say to myself “Oh, I remember reading about that… too bad I forgot what it all means…” Even with some of the basic modeling, the CFA was useless b/c the info is just too cumbersome. I had to learn all my modeling based on other models and to be honest, no one uses most of that junk in the books anyway.
My take is that the CFA presents a very basic understanding of finance and an interest in maybe being an analyst or what not. Other than that I find much of the material unwieldy. From what I see, you learn most of the stuff on the job. So I can see why most SS firms didn’t want to hire me. This job requires you to be quick on your feet, be able to model/analyze/write something in a very short time, then you have to sell it. Its a crap ton of work, but fun. I imagine the process gets a little easier with experience, or so I hope.
But again to reiterate, if I were a hiring manager, I’d look at the CFA or your pristine GPA with very little weight. I’d look at your FO skills, writing skills, problem solving skills etc…
Ok, other SS analysts please tear me apart.
;P
 
CFABLACKBELT Wrote:
——————————————————-
> The amount of industry information can be so
> overwhelming; I sometimes wonder whether I’ll ever
> become an expert as the more I learn the it seems
> the less I really know… I absolutely love it
> though.
My advice: Most of the stuff you are talking about is noise and irrelevant to the economic value of the business. For most companies / industries, only 2-5 things actually matter. Figure out what they are and filter out the extraneous stuff. Easier said than done, of course. But my point is that you don’t need to know everything to be a good stock picker, you only need to know what matters.
> This brings me to my final point here. The CFA
> counts for almost nothing at this job IMO. Sure I
> guess it kinda helped me better understand
> Accounts Receivable and Depreciation. And I guess
> when I come across tax items or what not in the
> 10K I say to myself “Oh, I remember reading about
> that… too bad I forgot what it all means…”
> Even with some of the basic modeling, the CFA was
> useless b/c the info is just too cumbersome. I
> had to learn all my modeling based on other models
> and to be honest, no one uses most of that junk in
> the books anyway.
Thank you for posting this. I’ve been the lone voice around here for a while that the CFA is close to useless for “real world” stuff. I was in a meeting earlier this week and we were talking about some macro data, and my boss was explaining interest rate parity to me – I was like “Oh yeah, I know what that is, that was on one of the CFA exams – I guess those exams aren’t completely worthless.” And we all had a good laugh since they are basically worthless.
When hiring, we look favorably on someone who passed the CFA level 1 exam, and then discourage them from finishing the rest of the exams as 2 and 3 are irrelevant.
> My take is that the CFA presents a very basic
> understanding of finance and an interest in maybe
> being an analyst or what not. Other than that I
> find much of the material unwieldy. From what I
> see, you learn most of the stuff on the job. So I
> can see why most SS firms didn’t want to hire me.
> This job requires you to be quick on your feet, be
> able to model/analyze/write something in a very
> short time, then you have to sell it. Its a crap
> ton of work, but fun. I imagine the process gets
> a little easier with experience, or so I hope.
This.
Congrats on getting in. My advice is to get away from the sell side as fast as possible and find a good mentor on the buy side. If you think the CFA stuff is crap, the sell side isn’t much better. After 3-5 years of learning “the wrong stuff” it can get hard wired and it will be hard for you to learn to invest (as opposed to rehash press releases like on the sell side). I’m not ripping your experience because I think the sell side is a good place to start, but I wouldn’t want to stay there if I were serious about succeeding as an investor. Learn as much as you can, develop your technical skills (as it sounds like you are), and look to make a jump after 2 years or so.
Overall awesome post, thanks for sharing that.
Edit: definitely feel free to drop me a line if you ever want to talk about how to move to the buy side or how to ramp your sell side skills. [email protected]
 
Aren’t the models already built, don’t you just have to enter the variables and interpret the result?
 
CFA teaches you fundamentals… please explain to me how FUNDAMENTALS can be wrong? No… better.. point to 1 topic (not subjective crap) which actually IS wrong. Useless - do you apply daily your uber skills of solving quadratic equations? No. Are those skills useless - ABSOLUTELY NOT
 
I hope no one goes through the CFA program thinking they’ll learn everything they need to know and be ready to just jump in the deep end.
I believe it does provide a good basis of understanding for a wide range of financial topics, and the more specific aspects of portfolio management. I think successfully making it through the program also tells your employer (or prospective employer) that you’re not a complete idiot.
Outside of that, it’s up to you.
 
I think it gives you the tools, it wouldn’t make you a better investor, but I don’t see how learning the fundamentals could be worthless.
 
how can you say that L2 is worthless bro, you think they wouldve looked at you if you and Joe Bloe Smoh who passed L1 were competing for the same position?
 
No kidding. Why did you think the CFA would be any different than any other degree or designation? I can’t tell you the last time I used something I learned during my BBA in finance, MBA, or CFA. Sure there are general concepts we learned and used every day but these things aren’t meant to train you for any specific job. The point is you do what you can to better yourself and hopefully be able to use bits and pieces from your education but of course none of that prepares you for any job. It’s not trade school where you learn how to weld and become a welder.
 
bromion Wrote:
——————————————————-
> Thank you for posting this. I’ve been the lone
> voice around here for a while that the CFA is
> close to useless for “real world” stuff.
HUh….no. Many people on this forum including me have posted that it’s useless.
I was in
> a meeting earlier this week and we were talking
> about some macro data, and my boss was explaining
> interest rate parity to me – I was like “Oh yeah,
> I know what that is, that was on one of the CFA
> exams – I guess those exams aren’t completely
> worthless.” And we all had a good laugh.
>
Cool story, bro.
 
comp_sci_kid Wrote:
——————————————————-
> CFA teaches you fundamentals… please explain to
> me how FUNDAMENTALS can be wrong? No… better..
> point to 1 topic (not subjective crap) which
> actually IS wrong. Useless - do you apply daily
> your uber skills of solving quadratic equations?
> No. Are those skills useless - ABSOLUTELY NOT
EMH is absolutely wrong. That’s a core tenet of CFA philosophy (or at least it was when I went through the program).
The valuation material is pretty questionable as well – dividend discount model? Puh-leaze. Nobody uses that. I don’t recall ever once using the other models they teach except DCF, either (although to be honest I forget what they even were – maybe something about some obscure residual value model and something about an “H model” or something).
The FSA stuff, while not technically “wrong,” is so far off the mark that it might as well be wrong. The currency translation stuff is not useful. Obscure percentage of completion accounting is also not useful (you don’t need to know 6 different ways that this might be calculated). What *would* be useful is forcing someone to make adjustments to a set of financials as might actually be the case in the real world – GAAP to pro forma. Having to reconcile some obscure depreciation schedules also seemed pretty pedantic. FIFO / LIFO gets two thumbs up though.
Things I found useful:
- the quant section – compounding, TVM, IRR, NPV, etc. is highly useful
- the overview of econ – this was very simplistic but at least it was on track
- the derivatives stuff is fairly useful, at least as general knowledge for hedging activities (they get a little out of control with butterfly spreads and stuff though)
- some of the alternative asset coverage was helpful to me
- a good portion of the bond stuff was useful, although I doubt I needed to go that detailed
Obviously, results will vary depending on what job a person has. But if you are a wannabe equity or FI analyst / banker / PE analyst, etc. (the kind of jobs that people actually want), you don’t need to know 85-95% of the stuff on those exams.
 
Great post.
I just celebrated my 7-month anniversary on the SS.
I’ve had similar experiences that I will elaborate on shortly.
P.S. Rehashing press release is an industry secret- you gotta keep that on the DL :P
 
comp_sci_kid Wrote:
——————————————————-
> Bromion can you refresh my mind and tell me what H
> stands for in EMH?
Hope
 
If you took all the information from this forum and combined it you would get:
CFA - The best designation you can get in the industry that teaches you a ton, is useless, and can help you get a job and is no help in landing a job.
Networking - The best thing you can do to get a job, yet is not usefull in the job search.
Research - The position where everyone wants to be that is too hard to get into unless you have a top 10 MBA, but many peole that AF’ers know are in equity research without an MBA at all.
MBA - Only worth your time and money if you are going to a top 10 school, but still not worth it because of the money, but you have to have it to do anything in the finance industry unless you know someone to get in, but it is still worthless without experience.
Experience - This is what you need to get into any job you are looking for, but if you have to much experience you will be labeled as too old to make a career move.
My point here is the CFA, MBA, career path, networking or whatever provides only the value that you are willing to assign to it. For some, one of these can be a life changer; for others, they are useless. If you think the CFA is useless, by all means don’t pursue it. If you feel it will give you more knowledge and feel that it is usefull, then go for it.
 
I think it gives a decent and broad understanding of some of the background and components of investment analysis. You basically have to have it to get into an entry level analyst role at my company (buy side).
 
Captain Windjammer Wrote:
——————————————————-
> bromion, would you please remind me what you do
> again?
I think he’s kind of a generalist at a hedge fund - covering a lot of different sectors and countries. He did ss ER too if I recall correctly.
 
so will you complete the CFA now blackbelt that the material is so useless?
 
I think a clear distinction should be made between professional designations (i.e., CFA) and academia (i.e., MBA).
A professional designation should teach you a good amount (obviously not 100%) of on the job skills. A great example is the CPA.
An academic degree is there to teach things in a vacuum (to an extent) and to make sure the foundation is there so one can build on it with work experience/knowledge.
Therefore, I agree with Bro and BlackBelt that the CFA designation isn’t really carrying its weight in that regard. It shouldn’t try to replace the education learned in a Masters of Finance program or an MBA program.
Instead, the CFA designation should bridge the gap between learning about FCFF in school (or some book), and how to arrive at it via pro-forma statements, etc. This is why although individuals on this forum have passed some level of the CFA designation, there are still so many inquires about Excel/Modelling courses.
I personally work in ABS, and can tell you that CFAI is really behind on this stuff. Yet, I read all these reports from S&P and Moodys from analyst with their CFA charters and wonder what benefit they got from it. I’m studying for level 2 and the MBS/ABS section is weak. Actually, my Masters in Finance taught me more of a foundation. In that regard, the FI section of level 2 is completely useless IMO.
 
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